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Reason Foundation

Broadband "market failure" myth takes another blow

Steven Titch
January 26, 2006, 1:39pm

Municipal wireless, which began as a socialistic vision of government-owned Internet access, is morphing into a commercial juggernaut that carriers should do their best to embrace as participants, says a new research report from Visiongain, an international market research firm with offices in San Francisco and London. As much as it is aimed at municipalities, the report, which sells for ₤1,499 ($2,650) at www.visiongainintelligence.com, is also being marketed to telcos, cable companies and wireless operators, for whom Visiongain advises that "resistance is futile," but that "muni broadband is as much an opportunity as it is a threat." The report, "Municipal Broadband Networks: Market impact and implications, 2006-2011," says there are more than 400 cities worldwide planning to deploy municipal broadband networks and the number will double in 2006, making community broadband initiatives a very real and significant trend. From VisionGain's press release:
While these networks present yet another new competitive threat to the broadband market landscape, there are opportunities to be grasped for service providers, whether fixed-line or wireless, if these companies play their cards right. Major vendors, such as Motorola, Cisco, HP and IBM are already reaping cumulative contract awards running into hundreds of millions of dollars.
Whoa! Those who believe government should be running telecom never stop saying the free market has failed because there's no profit in ubiquitous broadband deployment. Now comes a market forecast that all but commands commercial providers to seize the day. While the release holds back details, it teases that the most successful "municipal" operations may turn out to be non-municipal commercial networks run by private enterprise, not local government, a conclusion reached last year by JupiterResearch and the Yankee Group.
However, many technological and business factors need to be considered, any one of which can better or worsen the outcome for any given municipality. Often, cities lack sufficient experience and knowledge of technologies to make the best choices and compound the problem further by inadequately funding the effort or by employing a business model that can not sustain the endeavor. This report examines the various technology options open to communities in deploying broadband networks, as well as the business models, assessing the advantages and disadvantages of each approach. It looks at case studies of successful and failed initiatives, identifying and outlining the reasons behind them. The impact that these networks have had and will have on local markets and incumbent operators are also analyzed.


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